Deflation, Greece, Spain, Bear Market…main topics at Money Show!

The Las Vegas Money Show attracted some 2000 traders and investors, May 14-17, 2012!

I just finished with 4 days at the Las Vegas Money Show, some 300 workshops, and some great presentations. Steve Forbes, Steve Hochberg, Andrew Busch, Brien Lundin, Peter Schiff, Mark Skousen,  and Jim Jubak were some of the speakers at this conference. The main messages at this conference were the problems in Europe and the likelihood of this situation creating a serious banking and deflationary crisis in the coming months and years. Why are the inflationary pundits likely wrong…about the coming deflationary environment that is emerging?

First of all, our money system today is a digital system with high-speed computers as the means for distributing money units. Today, some 96% of all money transactions are done via electronic transmissions and exchanges. This is unique to 2012 and much different from the markets in Zimbabwe (2009-10) and Germany (1923-24). Both of these hyper-inflations were caused with a PAPER monetary system. Barrels of paper were the means for increasing the money supply in the markets and then increasing prices of goods and services. Today, we have only about 4% of all money transactions done with PAPER. Does this image create a mindset of hyper-inflation (picture taken from Germany in 1924)?

Where are all the ‘paper’ notes today? Only some $900 billion in dollar notes are in circulation today. Yet we have $trillions of digital units circulating between all the TBTF banks and other non-bank financial institutions. These digital units are not getting to real consumers to use for spending, however. Let’s remember that some 70% of spending is done by consumers. Consumers, today, are short of money units to spend and this limits the possibility of hyper-inflation (for most goods and services). So where are all the digital units going today? Let’s get this image in our MINDS when we think about today’s money system:

 

Most of our money units today are stored in cyberspace as digital numbers. Central banks create new units (out of nothing) and ‘type’ into their accounts whatever number they desire (we call this QE). These units then can be used to increase the accounts of other dealer banks or the financial accounts of governments. These units are not getting to real consumers for immediate spending…as in prior periods of history. What is happening is that these units are creating massive ‘excess reserves’ in some commercial banks and then being used to purchase government debt securities. This process creates new money units (for the big commercial banks) but not necessarily any hyper-inflation within the greater markets.

 

The best presentation at the Money Show was that of Steven Hochberg, an Elliott Wave Analyst. His presentation clearly demonstrated that what is now happening in the greater global markets is a ‘roll over’ of many stock markets and a trend towards value destruction and deflation. This trend actually started back in the early 2000 period and is now reaching a new and more serious phase. Debt has reached levels which can no longer be sustained and this is causing all the problems in Greece, Spain, Italy, and soon the USA. Actually, all the global markets (including China) will enter this deflationary environment in the near future. Think with this image going forward:

 

The bottom in VALUES has not been reached yet! We have many more years of deleveraging, foreclosures, and deflation ahead of us. This environment of DEFLATION will eventually affect all asset sectors and all markets. This situation should be evident to everyone by mid-2013. Many of us, however, now recognize the symptoms of deflation and many of us ‘see’ this trend emerging with a vengeance. Digital money is only one cause of this trend. The main cause is psychological. History demonstrates that market sentiment changes markets in predictable cycles. We are now entering the ‘winter’ phase of a long wave depressionary cycle (a 70-80 year psychological cycle). Some call this cycle the Kondratieff Wave Cycle:

 

 

Let’s conclude with this message:  History is the direct result of the human nature. Unfortunately, it is not reasonable to accept that knowing history can change human nature. Therefore, history will repeat itself because human nature does not and likely cannot change despite education. Of course, better education could reduce or minimize some mistakes, but people in general are stupid. People are stupid enough to repeat their own mistakes, as well as the mistakes of others throughout history. Therefore, history repeats despite education, because human nature does not change (a paraphrase of many philosophers of history).

 

Investment suggestion:  For those who now hold gold and silver and/or mining stocks in their portfolio, the coming deflationary environment may temporarily cause some downward pressure on precious metals. This situation, however, is unlikely to last long. As investors and traders become aware of the ‘bubble’ in government securities of all forms, they are likely to seek a physical unit (gold and silver) as their ‘store of value’. This will create a ‘rocket’ explosion in the price of gold and silver. The next couple on months may be difficult for these metals as deflation initially creates a demand for CASH. Stay patient and prices will change with sentiment. Enjoy! http://kingdomecon.wordpress.com.

 

 

 

 

 

Think: Philosophical ‘Dualism’ when Investing in Assets Today!

Goods are ‘Material’ whereas ‘Prices’ are ‘mental’!

The key to understanding today’s markets centers on understanding the Philosophy of Dualism. We all use a ‘dualistic’ mindset when we go shopping and when we buy goods. A good example of Dualism in action is when we purchase a home. The house that we desire to purchase is a ‘material’ good but the ‘price’ of this house is subjective and derived from our mind. The philosophy of ‘monism’ (which most of us learned in our schools) is no longer valid for sound economic thinking.

Monism is the philosophy that both ‘house’ and ‘price’ are material things. This thinking had some validity when our ‘dollar’ was defined as a silver coin (as it was when originally defined in 1792). Today, however, our ‘dollar’ has no definition and has no substance. Following is an image of our dollar as a silver coin:

 

The name ‘dollar’ described a silver coin when our ‘dollar’ was originally defined by Thomas Jefferson in 1792. The history of our ‘dollar’ has been a material thing and has been viewed as a material thing by most Americans since its original definition as 371.25 grains of pure silver. Today, however, our ‘dollar’ is no longer a material thing. Today we use immaterial (digital units) as our ‘dollars’ (which we call ‘legal tender’). All this evolved after the closing of the gold window in 1971 by our then President, Richard M. Nixon. Today, we need to visualize our money units as ‘imaginary’ symbols and numbers…with specific mental ‘names’ (dollar, yen, euro, pound, etc.). These images reveal today’s reality:

What happens today is that fiat numbers are given ‘names’ (dollar, yen, euro, pound, etc.) and then digital units are created…out of nothing…and entered into computers. High speed computers now transfer money units all around our planet at the speed of light. Most of the Western world has adopted digital money and some 96% of all units created and spent are now electronic units created by our commercial banks. Some 70-80% of all stock market volume is now electronic. Practically all currency trading is now electronic. And most of us now invest, trade, borrow, spend, and save within cyberspace. Visualize these images to discern today’s reality:

 

 

There are still many investment advisors and financial pundits who desire to maintain the illusion that our money is still paper. If you listen to most of these financial pundits you will witness them thinking that our money is being ‘printed’. The illusion of ‘printing’ is maintained since a small portion of our money units are still paper notes and metal coins. But this small portion is now only about 4% of all money transactions. When you watch money programs on TV you often will witness these misleading images:

 

 

These images of paper notes, however, represent only about 4% of all money in circulation today. The vast majority of money units (some 96%) are now digital units within our computer screens. Electronic money has emerged in the past 10 years as the money of choice for most nations on this planet. We might call these units ‘electrical charges’ which appear as virtual images in our computer screen. Most of us now invest, buy, sell, save, borrow, and value our assets via electronic money units. We might visualize this as follows:

What we need to understand today is that we are approaching a period where money units are really nothing but imaginary numbers and symbols (with ‘names’). Money units really do not ‘exist’ as real material things (objects) today. Furthermore, our money units are no longer created as things with intrinsic ‘value’. When our then President, Richard Milhous Nixon, closed the ‘gold window’ on August 15, 1971, this decision created the emergence of our digital money of today. The initial decision in 1971 created the fiat paper currencies which you can observe above. This led to computerization of money in the late 1980′s and 1990′s which now is ubiquitous on a global scale.

 

The END of money may be emerging in the coming years unless the people on this planet desire to create NEW MONEY that is viewed as containing some real VALUE. Politicians like Ron Paul of Texas and many others are promoting alternative currencies backed by either or both silver and gold. The history of money supports some commodity as a unit of exchange and store of value. With the internet becoming ubiquitous, however, we may be seeing the end of all money in the coming years. Who desires a centralized digital currency which is controlled by ONE central bank for the entire planet? This envisions a ‘mark of beast’ image. Is this what is emerging in Europe today? The role of money to control society has a long and ‘dirty’ history. We all need to understand money and banking to discern future trends. Enjoy! http://kingdomecon.wordpress.com.

 

 

Video on the ‘end of money’ suggests that machines, robots, new technologies can create material goods and replace historical labor. This means that ‘money’ may have no role in our future:  http://youtu.be/wDJ18m6KUW4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our Ship of State is ‘sinking’ fast!

Watch this accountant’s video to discern why our Government finances create a ‘Titanic Event’

We all now recognize that DEBT and DEFICITS are the problem for Greece and much of the Euro Zone countries. These countries now experience riots and political insurrections daily as their ‘ship’ of State sinks. The bigger issue, however, is America and our ‘ship’ of State. Watch this video to discern our problem: 

http://www.youtube.com/watch?v=EW5IdwltaAc&feature=youtu.be

A great image of our problem might be the following:

What is likely to happen later in 2012 as more Americans become aware of our financial problems? Will we become similar to Greece with riots and insurrections in our major cities? Will Americans finally recognize that our elected representatives are playing with a ‘titanic’ event with no easy solution? Will our politicians continue to deceive and ‘fool’ the public with WORDS and rhetoric that is meaningless? The coming election period should reveal the mood of the American people and their desires…going forward.

Let’s briefly review a few items that will NOT work…going forward:

1. Increasing taxes will NOT work as this just means more funds for our politicians to waste on projects that add nothing to our ‘wealth’ or our ‘prosperity’. Also, increasing taxes reduces incentives for those who desire to invest in projects which would grow our wealth. So forget this option!

2. Decreasing taxes will NOT work either as this just makes our deficits greater and more impossible to repay. Also, countries like China and Japan who have purchased much of our prior government DEBT now have their own issues with growth and are unable to purchase more. So forget this option!

3. Monetizing our government DEBT via QE polices by Bernanke and crew will NOT work as this action will likely destroy investor confidence in our ‘dollar’ and encourage other countries to abandon our ‘dollar’ for any long-term savings or reserves. Also, ‘counterfeiting’ our dollar via QE is creating a ‘moral hazard’ for the Fed and all those who ‘watch’ the Fed and their actions. So forget this option as a longer term policy! 

4. Balancing our budget is now also impossible as current events demonstrate that this will not be viable given the make-up of our current politicians (their mindset). To attempt to fool the American public with some ‘long-term’ budget gimmick that balances the numbers some 10 or 15 years in the future (all on paper) is unlikely to work today. The American people now have access to many contrarian views which would debunk this effort. So forget any effort to balance our National, State, or Local budgets. We have gone much beyond the standard mindset of  rhetorical ‘deception’ and ‘word games’ to fool the American people going forward!

What should we all ask of our political leaders (to do) given the current mess and the coming ‘titanic’ event?

1. The first requirement is really quite obvious. We need to ask our elected representatives to ADMIT the PROBLEM! Our current situation is dire and serious and it can not be resolved without first admitting that we have a serious PROBLEM. Ask your representative in your State to watch the above video and think about the numbers. Then ask them to think about the numbers on this website:  www.usdebtclock.org. If none can give a logical and reasonable answer to these numbers, then they need to admit their addiction (i.e., spending)!

2. Can our financial problems be resolved without any PAIN or discomfort? I would say absolutely NO!

 

3. After admitting that we have a ‘problem’ and that resolving this problem will require some ‘pain’. We then can get on with a solution. It’s much like a person who has an alcoholic issue. The withdrawal is difficult but it eventually leads to a whole new person with a new ‘mindset’.

Think it over! We must admit the ‘problem’ before any progress can be made!!! Enjoy:  http://kingdomecon.wordpress.com.

 

 

The ‘Nature of Money’ is the ‘Achilles Heel’ of today’s Economists!

Today’s Economists seem unable to discern the reality of ‘numbers’, ‘symbols’, and ‘word names’ from material objects!

After listening to economists such as Lawrence Summers, Paul Krugman, Ben Bernanke, Tim Geithner, William Dudley, and Alan Greenspan…I have concluded that these persons lack an understanding of the reality of Dualism. Austrian economists seem to have a much better understanding of the nature of MONEY and the dualistic nature of reality. Let’s start with some basics to understand reality and Dualism:

1. As human beings we experience TWO realms or reality (mind and matter) when we buy, sell, shop, barter, exchange, invest, and value real wealth. Real wealth includes physical items derived from our ‘natural resources’ (oil, gas, iron, coal, wheat, corn, lumber, etc.) and then made into goods and things which we all exchange for money.  Examples of real wealth are items such as these:

 

 

 

 2. The second realm of reality is our inner self or consciousness. We all derive our words, names, symbols, and numbers (math) from this inner realm of reality. Most of us recognize our brain as a physical organ but many seem unaware of their MIND or inner being. To understand Dualism, economics, and money we need to recognize that we all experience TWO realms of reality. The key philosophers who recognized our Dual Nature were Socrates, Plato, Augustine, and Descartes. Economics and money are based on understanding this Dual Nature of Reality. This image reveals that our monetary ‘symbol’ ($) is not a material or physical item but really a derivation from our MIND (inner self):

 

 

3.  To understand the NATURE of ‘money’ and also why our current monetary system is illusionary and subject to collapse…we need to understand the Dual ‘nature’ of reality and then differentiate between these TWO realms. Economist’s such as Summers, Greenspan, Krugman, Bernanke, Geithner, and Dudley seem ‘unaware’ that our MONEY UNIT today is derived from ‘mind’…not ‘matter’. What Ben Bernanke is doing today is creating ‘money units’…out of nothing (his mind). Since we now have a digital monetary unit (globally) with units distributed, transferred, and exchanged via high-speed computers, Ben now can just ‘type’ new ‘numbers into the official master computer at the NY Fed and these new ‘numbers’ (derived from his inner thinking) become NEW MONEY.

 

 

 In conclusion, today’s economists and central bankers have created a monetary unit that is imaginary and illusionary. Digital units are not representative of real money. Capitalism is based on materialism and on physical money units. Austrian economists seem to understand that ‘money’ must be viewed as some thing with intrinsic ‘value’ (say silver or gold). Keynesian economists, however, have adopted mere mental ‘numbers’ and ‘symbols’ (math) as our money units. To understand the history of money and value, we need to differentiate between ‘mind’ and ‘matter’…the two realms of reality.

 

It would be beneficial if the above mentioned economists (Bernanke, et al) would go back to the philosophy of our Founding Father of the American ‘dollar’…Thomas Jefferson. Jefferson understood that our ‘dollar’ needed bo be more than a ‘name’ and a ‘number’. He defined our ‘dollar’ as 371.25 grains of pure silver and then helped to start a government mint which then minted coins based on this definition. The Coinage Act of 1792 was the foundation of our American money system and this philosophy was foundational to a sound money policy.

 

To understand the ‘nature’ of money we need to rethink our history of money. As the current system collapses from unsustainable debt and deficits, first principles become essential for understanding monetary reality. The Achilles Heel of today’s economists and financial pundits is their lack of understanding the philosophy of Dualism. Dualism is what we all use as we buy, sell, value, and exchange financial products in the marketplace. That’s my missive for today! http://kingdomecon.wordpress.com.

 

Definition of Dualism:  Dualism contrasts with monism, which is the theory that there is only one fundamental kind, category of thing or principle; and, rather less commonly, with pluralism, which is the view that there are many kinds or categories. In the philosophy of mind, dualism is the theory that the mental and the physical—or mind and body or mind and brain—are, in some sense, radically different kinds of thing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What is ‘VALUE’ today? Is it Subjective or Objective?

Scream reveals the subjective nature of ‘value’ under our Ponzi Capitalism today!

 

The above art (called The Scream) was sold for a record $119.9 million on Wednesday, May 2, 2012. This picture was expected to sell for about $80 million. This sale represents the trophy-hunting atmosphere buoying the global art market, as billionaires vie for the few masterpieces that come up for sale. Bragging rights are part of the bidding process.

 

The Scream comes from a collection by Peter Olsen, a Norwegian real-estate developer. The angst in the image is meant to reflect the world’s environmental worries. The ‘value’ of this art reveals how subjective and personal this concept is to each person. Value is what ‘money’ is supposed to measure…but does it?

 

Today, we have a monetary unit (our dollar) which is created ‘out of nothing’ and many now want to rid themselves of this ‘unit’ in favor of something material. Capitalism is based on the concept we call ‘value’. We then invent ‘money’ to measure our idea of ‘value’ when we exchange a material good. Today, however, our ‘money unit’ is not based on any ‘thing’ (say silver/gold) and is merely a ’name’ (dollar) and a ‘symbol’ ($). Our Central Bank then creates digital units via typing in ‘numbers’ in a computer screen. This process reveals the ‘valueless’ nature of our monetary unit today.

 

To understand ‘money’ we also need to understand the concept of ‘value’. Before we had ‘money’ we exchanged our goods via barter. Barter is the foundation of Capitalism and it is this type of environment which reveals the subjective nature of ‘value’. To make ‘value’ more objective and measurable, we invented a ‘money unit’ (say 371.25 grains of silver) and we then gave this definition a name (say ‘dollar’). This is precisely what our founding Father of money (Thomas Jefferson) did in 1792 with the passage of the Coinage Act of 1792. 

 

Today, we do not have any definition for our money ‘unit’. Our dollar is now merely an imaginary number which appears as an ‘image’ within our computer screens. This makes our money totally subjective and we see this subjectivity as we witness people ‘valuing’ items of art or other goods in the marketplace. The above image is ‘art’ which was given a ‘value’ of $119.9 million by one person. Personally, my ‘value’ would be closer to $50.00. Value and money is totally subjective today and this art reveals this subjectivity is spades. Enjoy!  http://kingdomecon.wordpress.com.